Toast, Inc. Q1 FY2024 earnings

Toast reported $1.08 billion of revenue for the quarter ended March 31, 2024, up 31.3% from $819.00 million a year earlier. Gross profit rose 43.1% to $249.00 million, and gross margin reached 23.2%, up 1.9 percentage points from 21.2%. The bottom line moved the wrong way. Net loss widened to $83.00 million from $81.00 million in the prior year quarter, and diluted net loss per share was $0.15 versus $0.16. Operating loss narrowed to $56.00 million from $92.00 million, and operating margin was -5.2%, up from -11.2%.

Two items explain most of the gap between the better operating line and the wider net loss. The change in fair value of the warrant liability was a $36 million charge in the quarter, against $3 million a year earlier. Restructuring expenses of $41 million also hit the income statement under the February 2024 restructuring plan, which included roughly $30 million of severance benefits and about $10 million tied to accelerated stock-based compensation for terminated employees. Excluding those items along with stock-based compensation and other adjustments, Adjusted EBITDA was $57 million, compared with negative $17 million in the prior year quarter. Within operating expenses, sales and marketing rose to $107 million from $99 million, research and development stayed near flat at $83 million against $85 million, and general and administrative fell to $74 million from $82 million.

Demand and backlog metrics kept climbing. Toast counted roughly 112,000 Locations as of March 31, 2024, up 32% year over year, after adding over 6,000 net new Locations in the quarter. Gross Payment Volume was $34.7 billion, up 30%. Total ARR reached $1.3 billion, up 32%, split between payments ARR of $634 million, up 26%, and subscription ARR of $671 million, up 39%. Remaining performance obligations grew to $688.00 million from $517.00 million, while deferred revenue was $52.00 million, up 6.1% from $49.00 million.

Product launches leaned toward larger operators. Toast introduced a Restaurant Management Suite with multi-location scheduling, menu and price changes, partner integrations and benchmarking analytics. An enterprise tier adds Point-to-Point Encryption security and Enterprise Toast Care. A new Benchmarking product lets operators compare their performance against aggregated data from the roughly 112,000 locations on the platform. Toast also detailed a Digital Storefront Suite and a Marketing Suite that pairs marketing tools with automation. On cash, operating cash flow was negative $20.00 million, up from negative $55.00 million a year earlier, and capital expenditures were $13.00 million, up from $10.00 million. Free cash flow was negative $33 million, better than negative $65 million. Cash, cash equivalents and marketable securities totaled $1,115 million, and $330 million remained available under the credit facility.

Guidance for the second quarter puts non-GAAP subscription services and financial technology solutions gross profit at $320 million to $330 million, described as 20-24% growth compared to the second quarter of 2023, with Adjusted EBITDA of $55 million to $65 million. For the full fiscal year, Toast guides to non-GAAP subscription services and financial technology solutions gross profit of $1,325 million to $1,345 million, or 25-27% growth compared to 2023 and up from 23-25% growth, and Adjusted EBITDA of $250 million to $270 million, up from $200 million to $220 million. Management flagged seasonality, noting that financial technology solutions revenue per Toast Processing Location has historically been stronger in the second and third quarters. The risks that matter here are the ones visible in the numbers: a warrant liability that swings the GAAP net loss with the stock price, revenue concentrated in payments tied to GPV and restaurant traffic, competitive pressure on pricing, and the broader economic backdrop. Toast repurchased 0.2 million Class A shares for $4 million under a $250 million authorization announced in February 2024.